Mutual Funds

When you buy a mutual fund, you are essentially pooling your money with other investors together to invest. This pool of money is managed by a professional money manager. Each shareholder of this pool of money participates proportionally in the gains or losses of the fund. Mutual funds may invest in a variety of different types of investments, with stocks and bonds being the most common.

Self-directed investors could hold a variety of mutual funds across industries or sectors as part of their diversification strategy. Mutual funds come in all shapes and sizes, some funds are all-in-one and offer diversification amongst all types of sectors and investments, while others are more niche and offer exposure to a specific sector, such as technology. Regardless, there’s a large range of options to choose from.

An index fund is a mutual fund that contains certain investments that mirror those within a particular market index.

Instead of trying to beat the market, index funds aim to match it.

While a portfolio manager usually picks the securities included, they will be less involved day-to-day. This is considered "passive fund management."

A mutual fund is run by a portfolio manager and their team who are involved daily ensuring the fund is managed to meet its strategic objectives.

A mutual fund’s value can rise and fall with the market, so it comes with a degree of volatility and risk. There are also fees and taxes associated with mutual funds, which can impact returns.

Whereas a GIC (Guaranteed Investment Certificate) offers a more guaranteed return, backed by the government of Canada. However, with less risk, comes less reward potential. The rate you receive on a GIC may differ based on many factors. Contact your financial institution to find out more information.